Facts: a check casher cashes a check which is eventually returned without entry due to the maker claiming that the payee was altered. Looking at the face of the check, the alteration is not apparent.

Issue: Assumming the check casher is a holder in due course, will the maker still prevail?

My thoughts: 3-407(c) is interesting in that if the alteration is not apparent, the HDC can enforce the item according to its original terms. All the case law I pulled involves altered amounts, not payees. In this situation, say the check casher can enforce the check according to the original terms. This means then that we take the check with the original payee. Therefore, the true payee never signed the check, and it becomes a forged or non-endorsement issue and the check casher loses. Does this seem correct?

I would agree: since the intended payee received no benefit from the encashment you have a forged endorsement issue and the check casher is HDC (they were in the best position to detect the forged endorsement hence it's their problem).

I would ask the indended payee to complete an affidavit of forgery for the forged endorsement. You may have to refuse the without entry return and send it back for the proper paper work.